The IRS can normally audit three years back, so tax records live three years. It gets six years if it suspects substantial underreporting, so cautious businesses keep six. The Department of Labor can pursue wage claims two to three years back, so payroll paper matches that. Once the windows are visible, the rules compress into a short list.
Retention Windows, Ranked
Keeping everything for six years satisfies every rule on the chart except the bad-debt case, and it removes the need to classify each document at the moment you file it. Classification at filing time is where retention policies usually fail.
The Rules in One Table
How Long to Keep This Document
Federal minimums for small businesses. States and industries can require longer; when two rules apply, keep the record for the longer period.
| Record | Keep at least | Rule |
|---|---|---|
| Receipts and expense records backing a tax return | 3 years | IRS general limitations period (6 if income is underreported by more than 25%) |
| Invoices and sales records | 3 years | IRS: records supporting income on a filed return |
| Payroll records (wages, pay dates, hours totals) | 3 years | FLSA 29 CFR 516 |
| Timesheets and time cards behind wage computations | 2 years | FLSA: records on which wage calculations are based |
| Employment tax records (payroll tax filings) | 4 years | IRS: after the tax is due or paid, whichever is later |
Source: IRS Pub 583; IRS employment tax rules; DOL FLSA Fact Sheet #21 · checked 2026-08
The Edge Cases That Extend the Clock
Four situations stretch the standard three years. Underreporting income by more than 25% takes it to six. Claiming a bad-debt or worthless-securities loss takes it to seven. Filing no return at all removes the limit entirely. And property records, meaning what you paid for an asset and what you spent improving it, have to survive as long as you own it plus three years, because they set the gain when you sell.
The one-line policy that covers nearly every small business: keep everything six years, keep property records until sale plus three, and never discard records for an unfiled year.
Payroll Is Three Rules Stacked
Payroll retention confuses people because three regimes overlap on the same paper. The FLSA wants payroll registers, meaning who was paid, when, and how much, for three years, but only two years for the source documents that computed the wage: timesheets, schedules, piece-work tickets. The IRS separately wants anything touching employment tax for four years after the tax was due or paid.
Since one file often serves all three purposes, the sane policy is a single number. Four years for everything payroll satisfies every federal rule at once. Our timesheet generator prints exactly what these rules call a record on which wage computations are based, which is the document with the shortest federal window and the one most often thrown away first.
What This Means for What You Print Here
A rent receipt is evidence for both sides of a tenancy and support for a Schedule E, so it follows the tax clock: three years at minimum, six comfortably. An invoice is a sales record backing reported income, so it runs on the same clock. An expense report substantiates deductions, same again. A mileage log backs a vehicle deduction, so it lives with the return it supports. When one document serves two regimes, the longer period always wins, which is the only conflict rule you need.
Frequently Asked Questions
How long should I keep tax records?
Three years from filing is the IRS general rule, because that is the normal audit window. It stretches to six years if income was underreported by more than 25%, seven years for bad-debt or worthless-securities claims, and indefinitely if no return was filed. Property records live as long as you own the asset plus three years.
How long should a small business keep receipts?
Three years minimum for anything supporting a filed return. In practice, keep them the six years you would need if the IRS alleged substantial underreporting; scanned copies count as substantiation, so the cost of the longer horizon is a folder of PDFs.
What are the payroll record retention requirements?
Federally, they are layered: the FLSA requires payroll records for 3 years and the timecards behind wage computations for 2, while the IRS requires employment tax records for 4 years after the tax is due or paid. The practical rule that satisfies all three is to keep everything payroll-related at least 4 years.
Can I keep everything digitally?
Yes. The IRS accepts electronic records that are accurate, complete, and retrievable, and has since 1997 under Rev. Proc. 97-22. What fails an audit is not the medium; it is records that were never made or cannot be produced on request.